Corporate taxes and the location of FDI in Europe using firm-level data
AbstractEuropean countries are facing an ever-increasing competition for Foreign Direct Investment (FDI). This paper studies how corporate taxes affect the location of FDI in Europe. Firm-level data is used to estimate a conditional logit model. We start by analysing the impact of the level and volatility of three different tax rates on FDI. Next, we analyse how economic and monetary integration influences the effect of taxes on FDI. The interaction between taxes and the upward and downward cycles of FDI is also analysed. Finally, we focus on how the impact of taxes depends on project characteristics. We conclude that taxes play a significant role in attracting FDI, but the issues analysed imply that there are some nuances in this relation, many of them relevant for policy makers.
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Bibliographic InfoPaper provided by Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação in its series GEE Papers with number 0044.
Length: 28 pages
Date of creation: Dec 2011
Date of revision: Dec 2011
FDI; Location; Taxes; Conditional Logit Model;
Find related papers by JEL classification:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
This paper has been announced in the following NEP Reports:
- NEP-ACC-2012-01-10 (Accounting & Auditing)
- NEP-ALL-2012-01-10 (All new papers)
- NEP-EUR-2012-01-10 (Microeconomic European Issues)
- NEP-INT-2012-01-10 (International Trade)
- NEP-PBE-2012-01-10 (Public Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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